Down Payment Assistance Programs: Chenoa Fund

The Chenoa Fund down payment assistance program was created to assist individuals or families seeking down payment assistance while perhaps lacking the credit score needed for programs such as Home in Five, Home Plus, Arizona HFA Preferred, the Pima Tucson Homebuyer’s Solution, the City of Phoenix Open Doors, and the American Dream DPI

Program Details

The Chenoa Fund is a 3.5% down payment assistance is a silent second grant* that works in conjunction with an FHA first loan on a 30-year fixed-rate mortgage. Loan financing applies exclusively to single family homes. Standard loan guidelines exist, including sufficient income, credit minimums (more on that in a moment), and down payment requirements.

This DPA program allows homebuyers to purchase a home in any city within Arizona as long as the buyer is occupied within sixty (60) days of closing. This program is only to be used to purchase a home, meaning it cannot be used to refinance or for any other purpose. 

Qualifying buyers will receive 3.5% of the original loan amount that will be used only toward the down payment and not things like closings costs or rehabilitation expenses. This initiative limits the purchase price of a home to $280,880.

Homebuyer Eligibility

The Chenoa Fund applies to homebuyers who do not own another home, though you don’t have to be a first-time buyer). Because the Chenoa Fund DPA is aimed to assist buyers with slightly lower credit scores, the minimum FICO score needed is 620. 

And, as this program works with a government-backed, FHA loan, standard regulations will exist, such as having adequate income, but not that which exceeds 115% of the area median income (or AMI, which is a statistic by HUD for the purposes of determining the eligibility of applicants for certain federal housing programs) for a silent second mortgage that is forgivable after 36 months. However, if the AMI exceeds 115%, there will be repayment terms for the Chenoa Fund second. Also, FHA Acceptable credit and debt-to-income (DTI) ratio guidelines are also qualifying factors.

Additionally, all buyers must attend a homebuyer education course, receiving a certificate of completion. A home inspection is also required. Prospective buyers can find a list of HUD-approved Housing Counseling agencies providing the course locally through hud.gov.

Second Mortgage Details

Because this assistance program is a second mortgage, there are some rules that apply. As mentioned above, there is an AMI threshold. If the buyer’s income is less than 115% of the AMI, the rate is 0% and is 100% forgiven after 5 years with no monthly payment. If the income is more than 115% of the AMI, the second mortgage is repayable with a rate based on amortization.

For more information on the Chenoa Fund down payment assistance program, contact your local licensed loan officer to determine if this path toward buying your first home is the right for you and your family.

* A silent second mortgage is a second mortgage placed on an asset (such as a home) for down payment funds that are not disclosed to the original lender on the first mortgage. The second mortgage is called “silent” because the borrower does not disclose its existence to the original mortgage lender.

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